Is Now the Right Time to Buy goeasy Stock? Here’s My Take

Shares of goeasy stock (TSX:GSY) slumped last year on a federal announcement, but that has all changed since then.

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If you’ve been watching goeasy (TSX:GSY) in the last few years, the company just doesn’t seem stoppable. After climbing to all-time highs, there was a period when shares dropped back. But now it’s been on a tear that doesn’t look like it will come to an end.

Yet after having that fall years back, could it happen again? Today, let’s look at whether that could happen, and if now is the best time to buy goeasy stock or not.

What happened

First, let’s look at what caused the climb in share price way back when. We’ll start with the pandemic. During the pandemic, interest rates dropped to historic lows. This made it cheaper for Canadians to take out loans and mortgages, including those offered by goeasy. 

Furthermore, the housing market boomed, leading to increased demand for home renovations – another area where goeasy provides financing. So, with more people needing loans at a time when they were more affordable, goeasy saw a surge in loan originations, strengthening its financial position.

In addition, the economic uncertainty of the pandemic might have made it harder for some Canadians to qualify for loans from traditional banks. Goeasy, which specializes in non-prime lending to those with lower credit scores, became a viable option for these borrowers. This increased demand for goeasy stock’s services and likely contributed to the stock price climb.

Why’d it fall?

Of course after the pandemic shares of goeasy stock started to fall, but it wasn’t until the federal budget came out in 2023 that some became worried about goeasy stock. The Bank of Canada announced that the annual percentage rate (APR) would be capped on loan rates at 35%. And this led many to be concerned for goeasy stock.

With the maximum allowable rate of interest capped, goeasy came out with a statement basically stating that it was unworried about the change. As of February 2023, its loan portfolio was at 30% per annum, with a weighted average interest rate of new loan originations at about 30% as well.

In fact, only 36% of its loan portfolio was greater than 35% . And given it wouldn’t be an overnight change, goeasy stated they would be able to slowly reduce the rate without affecting earnings.

That seems to be the case!

In fact, goeasy continues to see positive momentum, with record loan originations quarter after quarter. This has led to even more growth for the stock. And even more positivity as the Spring budget came out for the federal government. Even better, it expects to hit between 33% and 35% APR for 2024, lowering that to between 29.5% and 31.5% by 2026, falling well within federal guidelines.

Shares of goeasy stock climbed once more as the budget demonstrated no more reductions in the APR, despite rumours to the contrary. While that doesn’t mean there won’t be in the future, it does seem that goeasy stock remains steady for the foreseeable future.

What’s more, it’s likely to grow in the immediate future, with earnings due out on May 7. The stock has beat out earnings estimates quarter after quarter, with overall earnings per share (EPS) growing steadily during the last few quarters. Should the stock do it once more, we could be in for another rise in share price for goeasy stock. So is it a buy? After decades of growth and proving its worth in good times and bad, I’d say absolutely. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has positions in goeasy. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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